6. Southwest Airlines (SWA) signed a contract that allowed it to buy jet fuel at a constant fixed price of $3.00 per gallon for the next 5 years. The average market price was $3.50 per gallon in Year 1 (saving SWA $0.50 per gallon) and increased by an average of $0.20 per gallon each year after that (increasing their savings by an additional $0.20 per gallon each subsequent year). What is the present worth of their savings per gallon over the 5-year length of the contract? Use i 10% per year.

6. Southwest Airlines (SWA) signed a contract that allowed it to buy jet fuel at a constant fixed price of $3.00 per gallon for the next 5 years. The average market price was $3.50 per gallon in Year 1 (saving SWA $0.50 per gallon) and increased by an average of $0.20 per gallon each year after that (increasing their savings by an additional $0.20 per gallon each subsequent year). What is the present worth of their savings per gallon over the 5-year length of the contract? Use i 10% per year.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.7P

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